Stellar -Finding a Common Language: How Banks Can Partner with FinTech Startups

  • Big financial institutions have the advantage of deep domain knowledge and wide customer bases. FinTech startups have sharp ideas to improve efficiency and decrease costs. How can these two universes–the established and the up-and-coming–work together for mutual benefit?

    At PayThink in New Orleans in September, major organizations in the payments industry, like Fiserv, Google Pay, HSBC, Mastercard, Samsung Pay and Visa, gathered to discuss innovations and trends in the payment space.

    One dominant thread emerged: the existing relationship with FinTech startups won’t advance innovation in banking, and fear might stymie it. I sensed a widespread urgency to collaborate with startups for sustainable change–or get scooped. Most organizations want to build inroads with FinTech, but the path to get there is foggy.

    From where we sit, collaborations for mutual benefit are everywhere. We look for strategies that will help banks expand their reach and build sustainably for future iterations. A few examples:

    Open APIs.

    George Kurtyka of BBVA and Michael Ward of WorldFirst delivered a provocative talk called “Frenemies: How Traditional Financial Institutions and New-Age Fintech Providers went from Combative to Collaborative.” They discussed recent insights in the market, including a PwC report which found “83% of Financial Services firms believe part of their business is at risk of being lost to fintech companies, 95% in the case of banks”. This pressure, explained Kurtyka, is in part what led to the development of BBVA’s forward-thinking open API environment, with the goals to increase collaboration, revenue, reach and accelerate innovation.

    Proactive Planning for the Regulatory Environment.

    Another valuable panel was “Regulatory Insight into the Blockchain” moderated by Dana Syracuse (Buckley Sanders) with Ben Reynolds (Silvergate), Michael Breu (Chief Compliance Officer for Gemini, the first licensed Bitcoin exchange in NY state). Breu walked through Gemini’s experience with regulatory approval, an 18 month-long process requiring extensive collaboration with industry regulators. Reynolds shared how Silvergate established their first business account for a Bitcoin exchange. The decision lead Silvergate to develop a systematic due diligence process for these new digital currency firms–a considerable investment of resources. Banks who invest in this regulatory research can advise new FinTech organizations for future sustainability.

    An Ecosystem Approach.

    Banks can leverage their depth of expertise by offering FinTech organizations the use of their API endpoints, large sales and agent networks, customer insight or branding for mutual benefit. In Nigeria, Access Bank made a strategic decision to open up their APIs for innovative Fintech outfits like Paystack and Flutterwave to launch and increase their reach.

    It might be useful to see open technologies not as not a total “disruption” of the industry, but as a way to fine-tune the successes banks already have. Banks with locations in 10 different countries have a mastery of the market, regulatory environment and customer knowledge that has tremendous value to up-and-coming FinTech innovators.

    If a pilot with distributed ledger technology is on your roadmap, we can help. Start the conversation by reaching out to us at [email protected].